Ahlawat & AssociatesAdvocates

Builders can not force buyers to settle the dispute through arbitration

Builders can not force buyers to settle the dispute through arbitration

A three-member bench of the National Consumer Disputes Redressal Commission (NCDRC) has held that it is not a compulsion for buyers to go for arbitration even if the seller-buyer agreement provides for an arbitration clause. Builders had cited changes made in Section 8 through the Arbitration and Conciliation (Amendment) Act, 2015 to make their point that all cases of flat buyers have to be referred to arbitration in view of the amendment.

Section 8 of the amended Arbitration and Conciliation Act, 1996 states that “a judicial authority, before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party to the arbitration agreement or any person claiming through or under him, so applies not later than the date of submitting his first statement on the substance of the dispute, then, notwithstanding any judgment, decree or order of the Supreme Court or any Court, refer the parties to arbitration unless it finds that prima facie no valid arbitration agreement exists….”

The Hon’ble bench while rejecting the contention of the builders observed that there are certain disputes that are to be adjudicated and governed by statutory enactments, established for specific public purpose and to sub-serve a particular public policy. Such disputes are not arbitrable. Further, the bench observed that the if the contention of the builders is to be accepted i.e. referring all the consumer disputes having arbitration clause to arbitration, such action would lead to undesirable consequences of setting at naught the entire purpose and object of the Consumer Protection Act, 1986 viz. to ensure speedy, just and expeditious resolution and disposal of consumer disputes.

This judgment has come as a big relief to buyers since the buyers agreements are mostly one sided and the arbitrators are bound to settle the dispute within the framework of the contract agreement.